Legislation update

Casual employee reform – A big win for employers and a smaller win for casual employees

Andrew Tobin, Damon King, and Adele Garnett / 01 April 2021

On 22 March 2021, the Federal Parliament passed a significantly reduced version of the Fair Work Amendment (Supporting Australia’s Jobs and Economic Recovery) Act 2021, commonly referred to as the Omnibus Bill (Bill). The Bill (now an Act) amends the Fair Work Act 2009 (Cth) (FW Act), and most of the provisions came into effect on 27 March 2021. 

Although a number of sections of the Bill, including those that criminalised wage theft, were dropped before being considered by the Senate, the passing of the Bill addresses uncertainties and issues around casual employment. 

In this article, Partner, Andrew Tobin, Special Counsel, Damon King, Senior Associate, Adele Garnett and Solicitor, John Hickey have summarised the amendments made to the FW Act.

The main purpose of the amendments was to address the uncertainty, financial implications and potential litigation resulting from the Rossato1 and Skene decisions. In these cases, long-term casual employees were found to be permanent following consideration of the entire employment relationship, rather than just the employment contract. These findings meant the employee was owed various paid leave and other entitlements reserved for permanent employees, and importantly, the employer was not permitted to offset the casual loading payments against the entitlements owed.

In order to address issues associated with casual employment, the following amendments have been made to the FW Act: 

  1. a legislative definition of casual employee has been inserted; 
  2. underpayment claims by employees who were thought to be casual but are found by a court to be permanent can be offset against any casual loading paid (typically an additional 25%);
  3. employers will have an obligation to offer permanency to casual employees who have been employed for 12 months in certain circumstances; and
  4. a casual employee information statement will be developed by the Fair Work Ombudsman, and this must be provided to casual employees on commencement.

We have summarised these amendments below.

New definition for casual employee

Previously, there has not been a statutory definition of casual employee. This has led to litigation, such as the Rossato and Skene cases. The FW Act now has a definition for casual employee which should significantly reduce the volume and risk of claims. 

According to definition, a person will be considered a casual employee if they are offered employment with "no firm advanced commitment to continuing and indefinite work according to an agreed pattern of work" and they became an employee as a result of accepting that offer.

Importantly, the only factors that will be considered in determining whether the employer has made "no firm advance commitment" are whether the: 

  1. employer can elect to offer work, and whether the employee can accept or reject work offered;
  2. employee will work only as required;
  3. employment is described as casual employment; and
  4. employee is entitled to casual loading or a specific rate of pay for casual employees under the terms of the offer or an industrial instrument.

The assessment is to be made on the basis of the offer, not the subsequent conduct of either party.

Where workers have been engaged as casual employees, they will continue to be casual employees until they elect to convert to, or are otherwise offered, part-time or full-time employment.

This definition applies retrospectively to offers of casual employment that were given before, on, or after commencement of the amendments, other than where a court has made a binding decision in relation to a particular employee. This will significantly limit any claims that casual employees might have previously been able to make to an underpayment based on alleged permanency.

Casual loading offset

Another protection for employers against underpayment claims by casuals alleging permanency, is that employers will be allowed to use casual loading (usually at least 25%) to offset Relevant Entitlements, if it is found that an employee has been incorrectly described as a casual employee. Relevant Entitlements include:

  • annual leave;
  • personal/carers leave;
  • compassionate leave;
  • payment for absence on a public holiday; 
  • payment in lieu of notice of termination; and 
  • redundancy pay.

This offsetting can only occur where an employee has been paid an identifiable amount (the loading amount) to compensate them for not having one or more entitlements during their employment. The loading amount can be identified either in a contract of employment or a fair work instrument (e.g., a modern award or an enterprise agreement), and can (but does not have to) include the proportion of the loading amount attributable to each entitlement. 

Again, this definition applies retrospectively to offers of casual employment that were given before, on, or after commencement of the amendments, other than where a court has made a binding decision in relation to a particular employee.

Casual conversion to permanency

The win for employees is that while there have previously been casual conversion rights (on request) for employees covered by some modern awards, the FW Act now provides these rights to all National System Employees. It also requires employers to actively make offers of permanency in certain circumstances.

Employer offers for casual conversion to permanency

Employers (other than small businesses) must now offer casual employees conversion to a permanent part-time or full-time role if: 

  1. the employee has been employed for at least 12 months;
  2. in the last six months of employment, the employee has worked a regular pattern of hours on an ongoing basis; and 
  3. this pattern of hours could continue on a permanent part-time or full-time basis without significant adjustment.

(Eligibility Requirements)

The conversion offer must be made in writing to the employee within 21 days of the 12 month anniversary and it must be consistent with the regular pattern of hours worked in the previous six months of employment. Employees have 21 days to accept or reject the offer, with failure to respond considered a rejection of the offer. After acceptance and within 21 days, the employer must both hold discussions with the employee about the details of the offer, and give the employee a written notice confirming the hours of work and the date of effect.

Importantly, an employer is not required to make a casual conversion offer if there are Reasonable Grounds" not to make the offer. Reasonable Grounds include, in the following 12 months: 

  • the employee’s position will cease or the hours significantly reduced; or
  • where there will be a significant change in the employee’s workdays or hours of work, and the employee cannot accommodate these changes.

If an employer has Reasonable Grounds to not make an offer, they must still notify the employee in writing within 21 days of the reasons why they are not offering conversion. If a dispute arises about casual conversion, this can be resolved using dispute resolution procedures in an applicable industrial instrument, the employment contract (if any), or the FW Act. Disputes may also be addressed using the existing small claims procedure. 

As a transitional provision, employers (other than small businesses) have six months from 27 March 2021 to assess the casual employees who meet the Eligibility Requirements and provide either conversion offers, or a notice of Reasonable Grounds not to make the conversion offer.

Casual employee right to request conversion to permanency

Under some modern awards, casuals have been able to request conversion to permanency for some time. However, the amendments mean that all casual employees have the right to request conversion to permanency from their employers (including small businesses) if they satisfy the Eligibility Requirements discussed above, and in the past six months:

  1. they have not refused an employer’s offer for conversion;
  2. they have not received written notice from their employer that they will not be converted based on reasonable business grounds;
  3. the employer has not refused a previous conversion request; and
  4. the request is not made during the 21 days after an employer offer of conversion.

Employers must provide a written response to an employee’s request for conversion within 21 days. In determining whether to accept or reject an employee’s request, an employer is again required to take into account the Reasonable Grounds mentioned above. Importantly, an employer must not refuse a request unless they have consulted with the employee.

Potential penalties for breach

These conversion provisions are contained within the National Employment Standards in the FW Act, and carry the possibility of civil penalties if an employer is found to be in breach. Further, employers are not permitted to vary or terminate an employee’s hours, to avoid any obligation to casual conversion. 

These conversion rights will be considered workplace rights for the purposes of general protections provisions. This means an employer may be sued for compensation and civil penalties if adverse action (e.g., dismissal, offering less shifts) is taken against an employee because they have these rights, or have exercised, or proposed to exercise, these rights. 

Currently civil penalties are up to $66,000 for a corporation and up to $13,320 for an individual involved, for each breach. 

New Casual Employment Information Statement

The last significant change is employers will be required to provide casual employees with a Casual Employment Information Statement either before or as soon as practicable after they commence employment.  The Fair Work Ombudsman has already developed this statement, and it includes information such as the meaning of casual employment and the right to casual conversion.

Next steps for employers and comments 

These are important changes impacting casual employment for employers and employees. Employers with a casual workforce will need take the following steps:

  1. within the next six months, review the employment arrangements of each casual employee to ascertain whether they meet the Eligibility Requirements and if an offer of conversion to permanency should be made;
  2. set up systems for monitoring when casual employees reach their 12 month anniversary, to assess if an offer of conversion to permanency should be made;
  3. review casual employment contracts. Many factors in determining if an employee is casual can be addressed in the employment contract. A well drafted contract is crucial to reduce the risk of underpayment claims.
  4. give casual employees the Casual Employee Information Statement (available on the Fair Work Ombudsman website) before or immediately after they start employment.

At the time of writing, there have been media reports about a potential constitutional challenge in relation to whether the Commonwealth has acquired property (i.e., the right of certain casual employees to underpayments based upon permanency) other than on just terms. We will continue to monitor this situation and provide updates as necessary.

If you require any further information or clarification, or for assistance with casual contract templates please contact our Workplace and Employment team.


1  WorkPac Pty Ltd v Rossato [2020] FCAFC 84.

2  WorkPac Pty Ltd v Skene [2018] FCAFC 131.

Authors
Andrew Tobin
Partner
Andrew is a Partner and the head of HopgoodGanim Lawyers’ Workplace and Employment practice.
Damon King
Special Counsel
Damon King is a Special Counsel in our Workplace and Employment practice with extensive knowledge of industrial and employment law matters.
Adele Garnett
Senior Associate
Adele is a Senior Associate in our Workplace and Employment practice.

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